By Shriya Maini*
Divergent decisions of the French and English courts on the Dallah case reiterate that the enforcement of arbitral awards under the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Award, 1958 (“NYC”) is not as straightforward in practice as it is in principle. In this essay, I elucidate the law laid down by the two incompatible judgments rendered by two different national courts in the Dallah case and conclude that the French Court’s approach was most satisfactory. In the backdrop of the arbitral enigma that unfolded amidst these divergent judgements, I examine the lessons in the light of two contentious issues – firstly, extension of arbitration clause to non-signatories; and secondly, the extent of a court’s discretion (judicial role) to refuse or allow recognition and enforcement of a foreign award under the NYC. Several lessons were also learnt when the dirty linen of the Dallah case was washed in public. Based on those lessons, I offer several suggestions that arbitrating parties, national judges and arbitrators could keep in mind while arbitrating such matters and pronouncing such judgments.
As for the first issue, I am in full consonance with the Cour d’appel’s judgment. I believe the French Courts rightfully rejected the Government of Pakistan’s arguments and held that the arbitral tribunal validly extended the scope of the contract and the arbitration agreement to include the Government of Pakistan who was though not a signatory yet a ‘party’ (“substance over form test”) to the arbitration agreement. In essence, it concluded that the Government of Pakistan was bound by the arbitral award rendered by the International Chamber of Commerce (“ICC”). Au contraire, the English Court had previously refused to enforce the arbitral award against the Government of Pakistan [rendered by the ICC tribunal in Paris which was the seat of arbitration] on the basis that the Government of Pakistan was not a party to the underlying contract and hence, it was not bound by the arbitration agreement contained therein. Interestingly, it reached this completely divergent conclusion based on the same test of analyzing the “common intention of the parties” which had been applied by the French Courts.
For the second issue, although the English Court intended to apply the French law, they did so using an English lens. I call it an English lens for it was heavily tainted with streaks of traditional English doctrines of privity of contract and separate legal personality. Finding that the Dalico test was not satisfied, the English Court outrightly dismissed Dallah’s appeal for enforcement of arbitral award. I believe that the Dallah was a classic case where Article VI of the NYC and Section 103(5) of the English Arbitration Act could have been easily applied by the English Courts. In other words, the French Court should have been allowed to accurately decide on the issue prior to the UK Supreme Court rendered its judgement. This was because the subject was purely governed by French law and the matter already been decided by an arbitral tribunal that sat in France. Besides, the issue also involved an arbitral award that had been granted exequatur by a first instance French court. In these circumstances, the arguments made by the Dallah for staying English enforcement proceedings pending the French court’s decision were absolutely correct. The only possible (though weak) counter-argument was that the refusal by the UK courts to enforce an award, even on the basis of Article V (1) (a) of the NYC would not affect the award’s validity in France or elsewhere.
I now turn to the lessons that we, as the arbitral community (comprising of both judges and lawyers) learnt from the Dallah and its aftermath.
Extent of Article V(1)(a) of the NYC
Article V of the NYC prescribes a substantive burden of persuasion and explicitly provides that in an enforcement proceeding, the party resisting enforcement (Government of Pakistan in the Dallah case) bears the burden of proof to establish that it is not bound by the arbitration agreement. This is expressly mentioned in the introductory provisions of Article V (1) of the NYC and is infact a fundamental element of the Convention’s basic purpose. Hence, the English Court’s decision is very difficult to reconcile with the above described line of thought. With the Court imposing on the award creditor (Dallah) the burden of producing “material sufficient to justify the tribunal’s conclusion” and upon Dallah’s failure to do so, refusing enforcement of the arbitral award in the U.K. Evident upon a plain reading of Article V, this cardinal rule is very essential for national judges interpreting the NYC to understand.
Additionally, I do not see any merit in how the English Court’s tennis analogy can be reconciled with the NYC’s allocation of the burden of proof in enforcement proceedings. Therefore, the English national judges were grossly incorrect, with due respect, in concluding that the Dallah had nothing more than the “advantage of service” and that the Dallah (and not Pakistan) was ‘required’ to provide material demonstrating the existence of a valid agreement to arbitrate, which it apparently failed to.
Dragging Non-signatories (Substantive Law) to arbitrate
The English national judges incorrectly ignored factual elements that were central to the Paris Court of Appeal’s (and arbitral tribunal’s) decisions, discounting essential factors such as:
- Until the day before the execution of the Agreement, all negotiations and formal correspondence (on Government letterhead) took place exclusively between Dallah and the Pakistani Government;
- GoP had given a guarantee for the financing;
- The Prime Minister of Pakistan presided over meetings of the Trust (despite holding no position in it);
- Pakistani Government created and later itself terminated the Trust – the latter act dissolving Dallah’s nominal contractual counter-party; termination letter was sent by the Secretary of the MORA on the letterhead of the MORA; Aikens, J. found that the Secretary intended to write this letter on behalf of the Trust, which he (mistakenly) believed still had rights it could enforced;
- Secretary of the MORA had signed the agreement, since he had done so in his capacity as chairman of the board of the Trust.
Interestingly, when the English judges only casually referred to the abovementioned factors in passing, it was the judges in France who placed substantial emphasis on the same (pre-contractual negotiation history and key correspondence most important to determine ‘common intention of the parties’- test of governing French transnational law), holding that the Government’s actions both before and after conclusion of the Agreement could only be explained by its status as a real party to the Agreement, though not a formal signatory (substance over form). Hence, English national judges faced with substantive enquiries of foreign French laws should have been cautious to imbibe these factors not just on paper (in letter) but even in spirit and substance, perhaps basing their decision upon expert opinion put forth by French lawyers and precedents on the issue.
Choice of Law Issues
In the Dallah, the law governing the arbitration agreement was indisputably French law. As explained above, Article V(1)(a)’s choice of law rule for the law governing the arbitration agreement requires Contracting States not to merely formally recognize foreign standards for the validity of arbitration agreements, but also to apply the substance of those standards in practice, just as the relevant foreign courts would do. In the Dallah, it is difficult to avoid the conclusion that the English national judges ultimately failed to appreciate the substance of French law and – to an extent, understandably – applied what amounted to a classically English approach to contract law, merely reciting the words of the French international arbitration principles articulated in Dalico and other French decisions (Lord Mance). More fundamentally, this dilemma challenges the application of confirming the wisdom of Article VI’s provisions for stays of enforcement proceedings when annulment proceedings are underway in the courts of the country where the award was made.
Review or rehearing: Scope of enforcement and recognition of the award
From a French perspective, the English judges appeared to be more focused on criticizing the reasoning of the arbitrators’ award. In contrast, the French national judges did not address the issues of merit in the arbitral award and instead decided afresh (de novo) the substantive issues of extension of the arbitration clause to the Pakistani government. The Dallah argued that the Judges of the secondary/enforcing jurisdiction (U.K. herein) should undertake merely a limited enquiry, on the grounds of international comity and the general “pro-enforcement” approach of the NYC. However, this argument was correctly rejected by the English national judges on the ground that the doctrine of Competence-competence must not be misinterpreted to mean that the arbitrator’s word on jurisdiction is the last word. The only possible reason to deprive the enforcing court of the power to review jurisdiction would be when an exclusive power of review were to be given to the courts of the place of arbitration. But this would go against one of the key purposes of the Convention, which was precisely to do away with principle of “double exequatur.” I agree with the English judges  that as far as the substantive question of determining the existence and validity of an arbitration agreement was concerned, the nature of review that an award received in an annulment action in the arbitral situs (court of primary jurisdiction, herein France) is not more relaxed from its review in an action for the award’s enforcement abroad (court of secondary jurisdiction, herein the U.K.). If this were not the case, then the English Courts would have been expected to show deference to the arbitral tribunal’s view that there was a valid arbitration agreement qua Pakistan which was clearly not the case.
Teleological Interpretation of the NYC
The NYC did not contemplate a process that permitted a jurisdictional objection to be relitigated effectively from scratch in a foreign court – 10 years after the arbitrators’ jurisdictional decision had been rendered and fifteen years after the events in question had occurred. Instead, like commercial parties, the drafters of the NYC intended that international arbitration be speedy, efficient and effectively enforced. The drafters of the UNCITRAL Model Law had similar objectives, including requiring that prompt challenges be made to jurisdictional awards. Regrettably, the Dallah did not achieve any of these objectives: it rather misapplied the Convention’s provisions on burden of proof, stays of enforcement and choice of law, producing a result that frustrated most of the basic objectives of the arbitral process.
* (A practicing advocate at the Supreme Court of India, the Delhi High Court and district courts at New Delhi, Shriya graduated from Gujarat National Law University, India. She later completed Bachelor of Civil Law programme on a full scholarship and obtained a Master’s in Law majoring in International Crime from University of Oxford. She was the recipient of the Oxford Global Justice Award 2015 for Public International Law and has previously assisted the President of the International Residual Mechanism for the Criminal Tribunals (MICT).)
 Gouvernement du Pakistan – Ministère des Affaires Religieuses v. Dallah Real Estate and Tourism Holding Company on 17 February 2011, Paris Court of Appeal, Case No. 09/28533 (“Dallah” judgment) set aside three ICC awards delivered in Paris, holding that the arbitral tribunal was correct in finding it had jurisdiction over the Government despite its not being a signatory to the arbitration agreement. These very same awards, however, only last November, were refused enforcement by the UK Supreme Court (Infra note 2) – which applied French law to the matter on the basis that the same tribunal had incorrectly decided it had jurisdiction.
 Dallah Real Estate & Tourism Holding Co. v. Ministry of Religious Affairs, Government of Pakistan  UKSC 46.
 Supra Note 3.
 Justice Aitkens, Dallah Real Estate & Tourism Holding Co. v. Ministry of Religious Affairs, Government of Pakistan  2 Lloyd’s Rep. 535 at § 77
 Supra Note 2.
 By virtue of the Dalico Test, France’s Supreme Court confirmed that it will look at the “common will of the parties” rather than national law when analysing arbitration agreements, choosing to preserve an international award where the agreement might otherwise have fallen foul of French rules on capacity to sign contracts.
 Article VI of the NYC and section 103(5) of the English Arbitration Act provides enforcement courts with authority to stay (or adjourn) decisions on enforcement pending the outcome of annulment proceedings in the arbitral seat
 The English Courts refused to grant stay in favour of Dallah on 25th January 2010 inspite of being aware of the parallel enforcement proceedings initiated by Dallah in France on 19th August 2009.
 Dallah filed enforcement proceedings in France on 19th August 2009.
 Court ‘may’ refuse enforcement under Article V of the NYC – discretionary standard.
 At the outset, it must be kept in mind that the two cases can only be factually contrasted under this heading and not in other respects, because the French court does not discuss any other issue. It obviously does not discuss the application of the NYC, since it entertained annulment proceedings and it does not deliberate upon issues of choice of law either.
 Dallah Real Estate & Tourism Holding Co. v. Ministry of Religious Affairs, Government of Pakistan  2 Lloyd’s Rep. 535 at § § 126 and 129.
 Because, in the absence of a contrary choice by the parties, the Applicable Law was the law of the putative arbitral seat and the same was agreed by the parties as well.
 The Paris Court of Appeal followed the Dalico doctrine whereby (1) an international arbitration agreement is not governed by any national law but by French “material rules” (règles matérielles) of international arbitration, and (2) the issue of whether a party is bound by an arbitration clause has to be solved by a factual enquiry, i.e. the court must assess whether the parties intended to go to arbitration.
 Albert Jan van den Berg, The New York Convention, 1958 at 266–67 (1981).
 Lord Mance and Lord Collins in Dallah, supra note 1, at §24 and §102 respectively.
 Lord Saville Dallah judgement at § 157.